A provision to extend the current EB-5 Program until September 30, 2018 is contained in the proposed Consolidated Appropriations Act, 2018 (“Omnibus”). If passed by the Congress and signed into law by the President this week, the Omnibus would extend current program authority for the EB-5 Program through the end of this fiscal year. Given supportive statements by Republican and Democratic leadership in the Senate and House, passage of the Omnibus appears likely.

The extension does not introduce any new requirements into the EB-5 Program. This clean, straight extension of the EB-5 Program will give lawmakers and the Department of Homeland Security additional time to make substantive changes to the program.

We will update our readers when we have more information.

 

Congress nearly averted a shutdown last week, but just missed the mark when Sen. Rand Paul (R-KY) temporarily blocked Senate passage of the fifth – and supposedly final — continuing resolution (CR) of this fiscal year temporarily extending current-level funding for federal activities until March 23, and lifting for Fiscal Year 2018 and Fiscal Year 2019 the spending caps established in the Budget Control Act of 2011. Senator Paul gave a barnstormer of a speech criticizing the increased spending levels and their impact on the deficit. Ending what was perhaps one of – if not the – shortest government shutdowns in history, the Senate approved the CR in the early hours of February 9, followed several hours later by the House of Representatives. With passage of the new two year budget (with increased spending levels for both defense and non-defense) and another short-term CR, congressional appropriators will spend the next several weeks leading up to the March 23 deadline drafting a Fiscal Year 2018 spending bill that reflects the new increased budget numbers.

Continue Reading Immigration Debate Begins: Prospects for EB-5 Reform & Reauthorization

Three days into the government shutdown, Senate Majority Leader McConnell (R-KY) and Senate Minority Leader Schumer (D-NY) took to the Senate floor Monday afternoon to announce an agreement to end the impasse and reopen the government. The Senate voted later in the day 81-18 in support of a short-term continuing resolution (CR) running through February 8, sending it to the House of Representatives where it was quickly approved 266-150. The CR was then signed by President Trump, allowing Federal workers to return on Tuesday.

Setting the Stage for Immigration & DACA Negotiations?

Democratic support, while not universal, was secured with a promise from Majority Leader McConnell to open bipartisan talks on various immigration issues, including the proposed border wall and the so-called “Dreamers” impacted by President Trump’s decision to end the Obama-era Deferred Action for Childhood Arrivals (DACA) program. The commitment from Majority Leader McConnell is for any bipartisan immigration proposal to go through the committee hearing process, debate on the Senate floor, and an open amendment process. If the Senate has not voted on an broad-based immigration agreement by February 8, the agreement is that DACA would be brought before the Senate for an up-or-down vote.

EB-5 Reauthorization

As the CR will continue current programs and authorizations, the EB-5 immigrant investor program will also extend through February 8, allowing House and Senate leaders to continue their work to reach agreement on a reform and reauthorization of the program. There are now three plausible scenarios for action on EB-5:

(1) A Broader Immigration Bill?  Reauthorization is included as part of a broad immigration bill. We have been told by senior staff for key congressional negotiators that EB-5 was not part of the bipartisan proposal rejected by President Trump on January 11. However, with the renewed focus on finding a path forward on immigration, it remains a possibility that EB-5 could be included in whatever final agreement is negotiated – although conventional wisdom is that initial immigration bill, which will focus on key issues like DACA and the wall, is not likely to carry EB-5 reauthorization;

(2) Omnibus Appropriations Vehicle?  Reauthorization is included in an omnibus appropriations package. With the February 8 deadline to fund the government, we could see a large spending bill that includes various other policy matters, such as EB-5. While reauthorization of EB-5 has largely been driven by Republicans in this congress, the 60 vote threshold in the Senate means that Democrats will by necessity have a seat at the table for an omnibus bill and will have some say on policy priorities in any reauthorization of the EB-5 program; or

(3) Existing Program Extension?  The EB-5 program is simply extended once again by another CR, which could last for a period of weeks, or months, or stretch through the end of the fiscal year on September 30 should no omnibus bill come together, or the program is not included in a broad immigration package. This is the least likely scenario and is not something that is actively discussed on Capitol Hill – yet – but stakeholders should be mindful that it is a possibility.

Challenges Ahead

The Senate agreement to end the government shutdown certainly adds momentum to the drive toward an immigration bill, however there are potential hurdles that will have to be overcome. During last week’s negotiations with President Trump to avert a government shutdown, Minority Leader Schumer had offered to support funding for the proposed border wall in exchange for action on DACA. In the aftermath of the shutdown the Senator rescinded that offer yesterday. President Trump in response tweeted that without funding for the wall he will not support any effort to resolve DACA. To that, add resistance in the House of Representatives, where conservative Republicans are urging Speaker Ryan (R-WI) to push an immigration bill that would be far to the right of any potential bipartisan agreement in the Senate. From the perspective of Senate Democrats, the hope is that if – and “if” is the operative word – they are able to secure a bipartisan immigration deal in the Senate it will put enough political pressure on House Republicans and President Trump that they have no choice but to support it.

This leaves a number of questions.

If the Senate doesn’t approve an immigration bill or hold a vote on DACA by February 8, will Senate Democrats be willing to force another government shutdown?

 What happens if the Senate approves an immigration bill or DACA solution, but the House declines to do so?

 And, of course, what will President Trump do if he doesn’t get funding for his proposed border wall, but is presented with an immigration or DACA bill for signature?  

Stakeholders Need to Remain Focused

With action on immigration of some sort more likely than not in the Senate by February 8, stakeholders interested in immigration reform and the EB-5 program should remain focused on advocating for their concerns over the coming days and weeks.

With the House and Senate both in session for only six days before February 8 the next two weeks will be intense, and we will be posting more as the debate unfolds.

With just hours to spare in order to avoid a government shutdown, the House and Senate approved on December 21 a short-term continuing resolution (CR) funding federal activities through January 19. The CR was approved in the House in a 231-188 vote, and in the Senate by a vote of 66-32. With passage of the CR, Congress has departed for the holiday break and is set to return on January 3. The CR extends the current authorization for the EB-5 Immigrant Investor Program while congressional leadership and interested stakeholders continue to negotiate a long-term measure to reform and reauthorize the program. A long-term reauthorization is unlikely to move as a stand-alone bill and could be included in any spending measure approved in January. Another option for a legislative vehicle would be immigration reform legislation, which has been highlighted by Senate Majority Leader Mitch McConnell (R-KY) as an opportunity for bipartisan cooperation in 2018.

With all eyes in Washington focused on tax reform, let’s not forget that there is a hard deadline approaching to address funding of federal activities with the current continuing resolution (CR) set to expire soon. The CR has been in effect since the start of the current fiscal year on October 1 and runs through December 8. This CR is the current vehicle for extension of the EB-5 Immigrant Investor Program, and is a temporary measure. Continue Reading Proposed Framework for EB-5 Reform – Headed for Omnibus in December?

The chances of a stand-alone EB-5 bill gaining consensus with lawmakers on Capitol Hill are low. With the GOP failing to repeal the Affordable Care Act, lawmakers may be spending time readjusting priorities in unexpected ways for the remainder of 2017. The EB-5 Program is unlikely to be a priority. Also, stand-alone EB-5 legislation has not proven to be a successful way for lawmakers to achieve reforming the Program. As we approach 2018, odds are that lawmakers won’t spend political capital on an EB-5 bill. Check out our recent Advisory.

As we head into the summer, there is no certainty that we will see changes to the EB-5 Program. Lawmakers may simply not act, which may result in EB-5 being included in Continuing Resolutions alongside other immigration programs that are temporary, at least in the near future. We also don’t know the fate of the EB-5 rulemaking process underway at the Department of Homeland Security (DHS). The EB-5 ecosystem is in limbo.

That said, regional centers and developers can’t be ignoring that change to fundamental aspects of EB-5 could happen quickly. In this environment, regional centers and other recipients of EB-5 capital have to gear up for changes to deals that could take effect midstream, while offerings are on the market.

Now is a good time for regional centers and issuers to develop plans for accommodating potential changes to deals that are on the market or being launched this summer. Having a solid plan of action before the law changes is sensible. Continue Reading Getting Ready for Change in the EB-5 Ecosystem

Douglas Hauer, Co-Chair of the EB-5 Financing Practice and a Member of the Corporate and Securities and Immigration Practices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., is speaking at the North American Securities Administrators Association’s (NASAA) 2016 Corporation Finance Training. The event is taking place November 18-19 at the Westin Oaks Hotel in Houston, TX. Continue Reading Mintz Levin Attorney Douglas Hauer to Speak at NASAA 2016 Corporation Finance Training

Several securities lawyers from several firms across the United States with a focus on EB-5 have organized a roundtable to discuss securities law issues.

The EB5 Securities Roundtable is an informal, independent group of EB-5 securities attorneys organized to facilitate best practices in the offerings of EB-5 securities. The EB5 Securities Roundtable is not affiliated with any EB-5 industry organization, regional center, offeror of EB-5 securities or job-creating recipient of EB-5 funds, and it receives no outside financial contributions, according to its website. Mintz Levin is one of the law firm participants.

Check out what’s new in the EB-5 world, where a team of securities lawyers are at work offering to help lawmakers understand complex legal provisions of proposed EB-5 integrity legislation. The group is called the EB-5 Securities Roundtable (the “Roundtable”) and is made up of securities attorneys (the author of this blog posting included) who represent a broad range of stakeholders in EB-5 deals such as regional centers, recipients of EB-5 funds and lenders.

Anticipating more action from lawmakers on the EB-5 integrity front, the Roundtable has proposed technical language solutions to securities law provisions that may come into any final version of an EB-5 integrity bill. The group is aiming not to lobby but to serve as a resource to help lawmakers line EB-5 reform efforts up with existing securities laws, regulations and policies. Securities law is a very complicated area with its own universe of terminology. We think the Roundtable’s resource will be welcome by lawmakers, industry groups and others who have a stake in EB-5 reform. 

One of the goals of the Roundtable, which Mintz Levin co-founded with several firms across the country, is to regularize EB-5 securities law practice. This is an important goal. EB-5 needs to be a more normative form of financing in the toolkit of lawyers. This starts with the securities lawyers in the field — gatekeepers of EB-5 in every sense of the word — giving sound advice to clients and promoting best practices.

Right now the EB-5 Program is still on the margins of the securities industry despite the fact that EB-5 financing benefits emerging businesses seeking capital across sectors, particularly in industries where construction and hard development costs are high. The Roundtable can have an impact as the EB-5 Program develops and becomes more institutionalized.

What is the future of EB-5?

We hope the EB-5 Program becomes established, permanent and normative. But Congress needs to act soon. We are about a month away from the Program lapsing.

Lawmakers are right on to insist on integrity reforms with any extension of the Program. The EB-5 Program has been plagued by bad actors, fraud and loose practices since it became more popularized in 2008. But lawmakers don’t need to reinvent a whole new legal structure to fix this.

Added integrity provisions are a sensible move by Congress. This is in step with current law. But changes to the law should be aligned with our existing securities laws, which are effective. Specifically, the United States has a very strong anti-fraud legal infrastructure in place when it comes to the purchase and sale of securities, including Section 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5, codified at 17 C.F.R. 240.10b-5, which is one of the most important rules targeting securities fraud promulgated by the U.S. Securities and Exchange Commission. These laws work. Congress does not need to re-write our securities laws in an effort to make EB-5 more sound and secure. The core integrity provisions for EB-5 are for the most part already in place. The technical guidance from the Roundtable can help lawmakers ensure that integrity provisions do not inadvertently create confusion, or conflict with existing obligations of issuers of EB-5 securities.

The Securities Law Roundtable has offered lawmakers a technical resource in the EB-5 reform process

Hopefully lawmakers will consider comments of the Roundtable when finalizing a draft of any legislation.

We’d like to continue to have EB-5 financing as an option in our toolkit to help clients. Many of our firm’s clients have been the recipients of EB-5 financing for projects ranging from the creation of a small media business to large-scale hotels, resorts and mixed-use real estate development. Congress making strategic moves to bring an increased level of integrity to the Program will benefit all. The Roundtable’s contribution to this broader effort is an important step forward, and will ensure that securities provisions in any new law are informed and workable.